Small Business Insurance

Business insurance does more than provide peace of mind and protection from loss or liability. The right policies support an overall operating strategy that helps you stay competitive, weather unforeseen accidents and overcome catastrophes.

No one likes paying for insurance, though, and some business owners carry only minimal coverage to save money. Or, they think their business doesn’t need insurance because it operates as a corporation or limited liability company. Either of these attitudes can expose a small business to devastating losses. Minimal coverage may not provide enough compensation. A business entity protects the owners from personal liability for business obligations, but it does nothing to help the business itself survive fire, flood or litigation.

Here are the types of coverage you should consider:

• Property and liability. Property and liability insurance protects you in the event of fire, flood, and some natural disasters, as well as judgments for accidents on your property or involving your employees while they are conducting firm business. A major advantage to this coverage is that the provider is obligated to provide defense counsel should you be sued. What’s more, should the lawsuit against you involve a mix of covered and uncovered claims, the insurer still must provide a capable attorney.
• Workers Compensation. Workers compensation insurance protects employers from lawsuits for most on–the–job injuries. It covers medical expenses, lost wages, permanent disability payments, legal defense costs and death benefits. State laws generally require workers’ compensation insurance for some or all companies, but requirements differ from state to state.
• Employee Health, Life and Disability Insurance. You may choose to offer health insurance, life insurance or disability insurance to your employees. Most large companies provide some coverage to employees; whether or not you choose to depends on several considerations, such as whether you can afford the expense and whether you feel that offering insurance will help you recruit and retain the talent you need.
• Vehicle insurance provides collision, comprehensive, and liability coverage for company vehicles.
• Business interruption. This insurance protects against losses that might result from temporary business closings due to fire or other events or circumstances covered by the policy. Most business interruption insurance reimburses the firm for lost net profits and ongoing expenses. Some policies also reimburse the cost of doing business at a different location when the original location can no longer be occupied and used for some period of time.
• Key executive life insurance. You may want to have key executive life insurance for certain key employees. The beneficiary of such policies is the company, not, for example, a family member of the insured executive. The goal of key executive insurance is to minimize the loss to the business upon the death of a key employee and/or to allow the company to buy out a deceased owner’s financial interest.
• Director and officer. If your company has a board of directors or officers, this insurance coverage protects them financially if they are sued as a result of the duties they perform for the company. Individuals may require you to have this insurance before they will agree to serve on your board of directors, and outside investors will often require you to have this coverage before they will invest in your company.
• Professional Liability or Errors and Omissions Insurance. If your business provides professional advice, you may need errors and omissions insurance to cover claims for such things as negligence, misrepresentation, or violations of good faith and fair dealing. These types of claims are not covered by general liability insurance, nor will a corporation or LLC shield you from liability for your own actions. People who may benefit from errors and omissions include medical and fitness professionals, IT consultants, brokers, agents, appraisers, architects, engineers and attorneys.
• Product liability insurance. Companies that manufacture, distribute, wholesale or retail products can be held liable if someone is injured by a defective or unsafe product. Product liability insurance can help pay the costs of these types of claims.
• Identity theft insurance. Data theft is becoming increasingly common, and if your business collects personal or financial information about customers (such as credit card numbers), the cost of remedying a data breach can be huge. Identity theft insurance can help cover these costs, including the cost of notifying customers who are victims and providing services to them.

It’s also important to know the limitations of any insurance policy you buy. For example, property insurance generally does not cover hurricane or earthquake damage–you’ll need a special policy if you want to insure your business against those risks. During the coronavirus pandemic, many business owners discovered that their business interruption policy excluded interruptions due to viruses or pandemics.

Once you have policies in place, review them at least once a year to be sure your needs continue to be met. Check to see if existing policies should be changed and whether you need to add new types of coverage:

• New services. If you have added new types of services, make sure your malpractice insurance adequately protects you against claims in those areas. And if you have purchased new equipment, property, or real estate, make sure your property coverage is up to date.
• Increased client revenues. If client transactions are up, you may need to boost business interruption coverage. If you have hired additional employees, check your workers’ compensation coverage. Also, as your firm grows, it may make more sense to insure key partners’ lives.
• Theft or crime. Some policies may not cover loss due to employee theft, embezzlement or fraud. Theft and crime insurance offers protection against those situations; as you add employees, the possibility could increase.

How much insurance do you need? The answer depends on the size and nature of your firm, and the potential for loss or liability. Talk with a business insurance agent – better yet, shop around and speak with several different agents –to get advice on the most comprehensive coverage you can afford.